By James Massola, chief political correspondent

Updated15 March 2017 — 11:43pmfirst published at 12:00am

Prime Minister Malcolm Turnbull will today reveal plans for a $2 billion expansion of the iconic Snowy Hydro scheme that could power up to 500,000 homes through a new network of tunnels and power stations.

The surprise intervention, a potential game-changer in the political brawl over flaws in the nation's electricity system, will increase the scheme's 4100 megawatt capacity by as much as 50 per cent.

The four-year project would massively increase the amount of renewable energy storage capacity in Australia through pumped hydro technology, which involves using cheap electricity to pump water uphill so it can be later released downhill through turbines, creating electricity when demand is high.

No new dams would be built, but a fresh series of tunnels and power stations are on the agenda, at an estimated cost of $1.5 to $2 billion. A feasibility study should be completed by the end of 2017 and the search for expansions sites will led by the Australian Renewable Energy Agency. The Tantangara Dam is understood to be an early area of interest.

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An expanded Snowy Mountains scheme would include a new series of tunnels.

The Snowy Hydro scheme was instigated under Labor prime minister Ben Chifley in 1949 and completed in 1974. About 100,000 men and women from more than 30 countries helped build a network of nine power stations, 16 dams, 145 kilometres of tunnels, and 80 kilometres of aqueducts.

The Commonwealth owns 13 per cent of the scheme, NSW 58 per cent and the Victorian government 29 per cent. Those state governments could also be asked to assist with funding the expansion.

Mr Turnbull said the Snowy Hydro had been built with the capability to be expanded and his government planned to maximise its capacity.

The plan to expand the Snowy Hydro scheme is bold, and will help manage the mandated influx of intermittent wind and solar power.

"The unprecedented expansion will help make renewables reliable, filling in holes caused by intermittent supply and generator outages. It will enable greater energy efficiency and help stabilise electricity supply into the future," Mr Turnbull said.

"By supercharging the Snowy Hydro precinct, we can ensure affordable and reliable electricity for Australian households and businesses."

Mr Turnbull said the expansion would create thousands of engineering and construction jobs and have no impact on water supplied water to irrigators in New South Wales, South Australia and Queensland.

It would also effectively kill off any short or medium-term to privatise the scheme, which was raised by the Coalition's Commission of Audit in 2014. The Howard government considered privatisation in 2006, but later dropped it.

The proposed expansion could, in one hour, produce 20 times the 100 megawatts of power from the proposed battery farm announced by the South Australian government earlier this week.

Mr Turnbull will make the announcement in the heart of the Snowy Mountains on Thursday morning, a day after meeting the chief executives of major east coast companies and securing guarantees of additional supply for the domestic market during peak periods.

Australia currently has 2.5 gigawatts of pumped hydro power capacity, with most of it from three projects: the Tumut 3 plant in the Snowy, the Wivenhoe Dam near Brisbane and the Shoalhaven scheme south of Sydney. All three projects are used for electricity generation, water storage and irrigation and if all operated at full capacity, they could power 3.3 million homes.

James Massola is south-east Asia correspondent, based in Jakarta. He was previously chief political correspondent for The Sydney Morning Herald and The Age, based in Canberra. He has been a Walkley and Quills finalist on three occasions.